Is it Worth Paying Attention to The Fed?

David B. Armstrong, CFA Weekly Market Commentary

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The Fed’s 9-1 decision the other day to leave the policy rate unchanged was not a shock or surprise to anyone.  But, the Fed did telegraph a polarity shift to the markets and equities gained slightly on future rate cut optimism (the S&P 500 was up about 0.3%) while the 10-year yield declined to around 2.03%. 

I’m guessing there is a 95% certainty the Fed will begin reducing rates sometime during the next 3 months. 

Guessing… 

I mean, when I started out in this industry, I would have NEVER told someone I was guessing. But now, I realize everyone is guessing when it comes to interest rates. 

If you asked anyone in 2012, 13, 14, 15, 16, 17 or 18 where they expected interest rates to be in the future, they most likely said, “Higher.” 

Yet the chart below of the 10-year Treasury Yield I created in Koyfin shows reality 

10YBondYield

Sure, rates have gone up and down, but are they really predictable? Is guessing even worth it?  And more specifically, is it worth it for investors who are just trying to grow their money? 

Here’s the S&P 500 over the same time frame as the 10year (with yesterday’s 0.30% gain showing in upper left corner). 

  S&P500

If you are a guest on CNBC or you earn a living writing or opining on the Fed, knock yourself out and predict away.  But I’ve got news for you – most people don’t give a second thought about your predictions… 

Because you are guessing. 

If you are sitting on cash and trying to figure out if you should invest in a bond portfolio for the long-term, I get it. There is some benefit to taking a look at the probabilities of interest rates going up and down in the near term. 

But if you are anything like the people we work with every day and you are spending a lot of emotional energy and time trying to predict interest rates, I’ll share my advice 

Don’t bother. 

Keep looking forward, 

Dave 

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About the Author
David B. Armstrong, CFA

David B. Armstrong, CFA

David B. Armstrong, CFA, is a President and Co-Founder of Monument Wealth Management. Along with his role as the firm’s chief investment strategist and portfolio manager, Armstrong is viewed as an industry leader in several areas including innovative practice management, discretionary asset management, digital marketing and social media. Dave is the writer of Monument Wealth Management's weekly "Off the Wall" Financial Blog and Market Commentary, and is frequently sought after by journalists and event coordinators. Visit his full biography here.

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